Plan early to have enough money for life

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More than half of Singaporeans will run out of money in the last 14 years of their lives, a survey finds

SINGAPORE - Science fiction movies involving time travel fascinate many of us because the opportunity of stealing a peek into the future is irresistible, especially if it brings the chance of a crafty financial windfall.

Who could resist looking up the winning numbers of the next few lottery draws to land an easy few million, or checking to see how the stock market fares?

But what if your time-travel jaunt allows you to see something that is not so exciting - yourself as an elderly person who has to continue working in menial jobs because you don't have enough money.

If you knew that this was going to be your destiny, what would you do now when you still have the time and ability to alter your future?

The sad reality is that you don't need a time machine to know that this is a likely outcome for many people here if they choose to look at retirement planning as something that is less urgent than meeting their daily needs now.

Yes, retirement planning can wait since paying today's bills is more important but you should also ask yourself this - wait until when?

If you already feel stretched now when you are young and working, imagine what will happen when you are older and can't work anymore?

An AIA Singapore survey found that 54 per cent of Singaporeans will be "14 years short" when it comes to the adequacy of their retirement savings.

This means that on average, if someone has the potential to live to 84, his savings for retirement will run out by age 70, leaving him with no money for the next 14 years.

Look at this from another perspective: If you don't have a good retirement plan, you may find yourself having to work again when you are much older.

This grim reality is facing many of those aged 55 to 70 now. Indeed, the Government is stepping in to give matching grants to encourage these folks and their families to top up their Central Provident Fund (CPF) Retirement Account so that they will receive more monthly payouts from CPF Life.

About 440,000 of these folks, or 53 per cent of those in that age group, have less than the prevailing Basic Retirement Sum - $93,000 this year - in their retirement accounts.

But there is only so much the Government can do to help you if you postpone your retirement planning until it is too late to do anything meaningful.

This was the reason why the ST RoundTable on Retirement was held - we want to encourage many young parents to start thinking about their own future because they are seen as the most vulnerable group today.

If you are a parent with young children, chances are you will be caught in the "sandwich class" because you will be squeezed on two fronts financially - taking care of your parents as well as your children. This is no laughing matter: The AIA survey found that about 60 per cent of these parents will end up short of cash in retirement if they continue with their current lifestyle and expenses.

This is why AIA is encouraging more parents to start planning for themselves, instead of spending most of their monthly income on their children.

When this topic was first discussed in Invest earlier this month, it got many people talking about their own parenting strategies.

A post by a young mother on The Straits Times' Facebook page summed up candidly the challenges faced by parents when it comes to expenses for their children: "But what choice do we have? We still got to feed them right?"

Of course, making plans for yourself does not mean that you have to end up short-changing them so that you have more money yourself. It is about having a good balance between yourself and your children, instead of making them the sole purpose of your existence.

 

Good parenting equals spending more money?

Some parents go the whole hog by ensuring that their children get the best of everything that money can buy, for their education, food, lifestyle and entertainment.

But doing this may not be the best way to bring up your children. While money is important, many will agree that good parenting does not have a dollar value to it.

All of us will be able to give examples of either successful people we know personally or famous folks we admire who have made it in life despite growing up in families with humble backgrounds.

So what matters more than money is the value and wisdom that you impart to your children. What parents do not want their children to do better than them?

If you are doing very well in your career now, you should ask yourself - did your own success come because your parents gave you everything, or is it because you work harder than the next chap because you didn't have everything to begin with?

If you agree that adversity is a strong motivation for success, then you should realise that splurging too much on your children can have the effect of dampening the same fighting spirit that made you successful in the first place.

 

Aim for a better outcome

To many parents, giving their children the best education that they can afford is the minimal thing that they must do.

This is a commendable target, but a better way to realise this dream is to aim for the best of both worlds - for every dollar that you save for junior's education fund, put another dollar or two in your own retirement kitty as well.

Being a good parent does not mean you have to end up a poor parent.

If you are the most financially savvy person in the family, all the more reason you should build a bigger nest egg, not just for yourself, but also for the whole family.

Being financially independent yourself means that you would have the option of being able to assist your children should they stumble and need help later in life.

It is fair to assume that the pandemic has not made life easier for the next generation because there is no telling how work opportunities have been affected in the near or distant future.

So when you are still able, start early to reduce expenses so that you can save or invest more. This is definitely a better outcome than saving less or, worse, not even having a plan, because the outcome of this scenario is that you would end up short in old age and need your children to support you.

This is the main purpose of retirement planning - to find out how much you will need if you want to maintain your current lifestyle and making sure you can save and grow your nest egg to support this when you no longer have an income.

Some of you may feel you don't need to save so much now because you intend to work past the retirement age. But you should know that many things are unforeseeable - your health may not permit you to work as long as you want, or certain jobs that you can do may no longer exist in the future due to technology.

What this means is that you don't need a time machine to tell you that you will need to make sure that you have enough money for your old age.

 

Source: The Straits Times © Singapore Press Holdings Limited. Reproduced with permission.

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